IPTM7531 - Total deductions: premiums: commission arrangements

Where there are arrangements for commission to be paid by an insurer when a policy or contract is taken out there may be implications for the amount of premiums to be included in total deductions, depending on the arrangements. This is subject to the change in Finance Act 2007 which restricts premium in certain circumstances where commission has been rebated or reinvested – see IPTM3527.

• where a policyholder pays a gross premium and receives commission in respect of that policy, then the full amount of the premium paid must be included, without taking the commission received into account
• where an amount of commission is received or due under an enforceable legal right and subsequently invested in the policy, then that amount must be included
• where a policyholder nets off commission from an insurer in respect of his or her own policy from the gross amount of premium payable, and the commission is not taxable as income on the policyholder, then the net amount paid to the insurer is to be included
• where a policy holder pays a discounted premium, then the discounted amount of premium paid should be included
• where extra value is added to the policy by the insurer, for example by allocation of bonus units, the premium to be included in total deductions is the actual amount paid by the policyholder, without taking the extra value into account.